Perenco Calls on Ecuador Not to Sell Seized Oil and to Resume Negotiations

08.07.2009 – 07:05

London (ots/PRNewswire) -

Perenco Ecuador Limited ("Perenco Ecuador") today called on the
Government of Ecuador to cease efforts to sell oil seized from Blocks
7 and 21 in defiance of orders by international arbitration
tribunals, and instead to seek a negotiated solution to the dispute
concerning the applicability of Law 42 to Blocks 7 and 21.

Perenco Ecuador is the Operator of Blocks 7 and 21 in Ecuador. On
February 19, 2009, the Republic of Ecuador and its oil company,
Empresa Estatal Petroleos del Ecuador ("Petroecuador"), commenced a
coercive process to collect from Perenco approximately US$327 million
they claimed were due under a 2006 Ecuadorian law ("Law 42") by which
the Government asserts a right to 99% of the oil revenues above an
arbitrary "reference price." In March 2009, Petroecuador began
seizing crude oil produced by Perenco and its consortium partner,
Burlington Resources Oriente Ltd. ("Burlington"), from Blocks 7 and
21 in Ecuador to satisfy the alleged Law 42 debt.

However, on May 8, 2009, a three member international arbitration
tribunal constituted under the auspices of the International Centre
for the Settlement of Investment disputes ("ICSID") unanimously
ordered that the Republic of Ecuador and Petroecuador were restrained
from "instituting or further pursuing any action" - including oil
seizures - "to collect from Perenco any payments [they] claim are
owed... pursuant to Law 42." The tribunal made clear that such are
orders "are binding on the party to which they are directed" and that
the parties "are under an international obligation to comply" with
them. A copy of the tribunal's order can be found on the ICSID
website, www.worldbank.org/ICSID. On June 29, 2009, a different
international arbitration tribunal in a separate ICSID arbitration
commenced by Burlington issued a similar provisional measures order.

Despite these ICSID tribunal orders, the Ecuadorian Government
has twice attempted to auction the crude oil it has seized from
Perenco and Burlington. Petroecuador first attempted to sell the
seized oil at an auction in May, but no buyers materialized. Last
week, on July 3, Petroecuador convened a second auction, but the only
bidder was Petroecuador itself. Petroecuador has announced an
intention to conduct a third auction today.

Rodrigo Marquez, Latin American Regional Manager for the Perenco
Group, said: "The failure of these auctions indicates that the
international business community has taken heed of the arbitration
tribunal orders and the risks of buying oil that the Government has
no right to sell."

Mr. Marquez added: "We continue to believe that a negotiated
solution is best for everyone. However, whether there are
negotiations is at this point up to the Government. They have a clear
choice. If they continue attempting to enforce the coercive measures,
there will be no negotiations and the situation will deteriorate
further. Perenco can neither negotiate, nor be expected to continue
to operate, when the Government - in defiance of orders by two
international arbitration tribunals - is seizing our entire
production, forcing us to absorb all the costs and risks, and
essentially demanding that we operate the Blocks for the Government's
sole benefit. On the other hand, the Government could choose to
comply with the tribunal orders by suspending those measures. The
tribunals established that during the pendency of the dispute the
Blocks 7 and 21 crude should continue to be sold by Perenco and
Burlington, with the disputed portion of the sale price put in
escrow. As soon as the Government decides to comply with those
orders, the path will be clear for further negotiations."

Mr. Marquez said: "The Government had a fair opportunity to make
its case to the arbitration tribunals, and in both instances the
tribunals concluded that the Government's position was wrong. The
tribunal orders are binding international obligations, which are also
part of Ecuador's legal system. We believe disputes that cannot be
settled by the parties should be resolved by the rule of law in an
international forum, not by coercive measures."

Perenco Ecuador Limited is part of a privately held upstream oil
and gas company and is the operator of Blocks 7 and 21 in Ecuador.